Greenspan: Financial Crisis Likely Worst Since WWII

Alan Greenspan writes in the Financial Times:

The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.

Home price stabilisation will restore much-needed clarity to the marketplace because losses will be realised rather than prospective. The major source of contagion will be removed. Financial institutions will then recapitalise or go out of business. Trust in the solvency of remaining counterparties will be gradually restored and issuance of loans and securities will slowly return to normal. Although inventories of vacant single-family homes - those belonging to builders and investors - have recently peaked, until liquidation of these inventories proceeds in earnest, the level at which home prices will stabilise remains problematic.

The American housing bubble peaked in early 2006, followed by an abrupt and rapid retreat over the past two years. Since summer 2006, hundreds of thousands of homeowners, many forced by foreclosure, have moved out of single-family homes into rental housing, creating an excess of approximately 600,000 vacant, largely investor-owned single-family units for sale. Homebuilders caught by the market's rapid contraction have involuntarily added an additional 200,000 newly built homes to the "empty-house-for-sale" market.

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Comments

[Birdman]

Alan, It probably is the worst since WWII, but you are partly to blame for it, especially your weak spined attitude twosrd GW Bushes economic polocies like tax breaks in the middle of a war. Only a moron would think that giveing ta x breaks while increasing spending for a war was a good idea, but you not only went along with it, you spoke accolades about its brilliance. So don't go around and make it seem like you had nothing to do with the greatest economic collapse since WWII.

[RuralLib]

You nailed it.

[Perdurabo]

One thing that people need to really, REALLY understand. Is that depressions are INTENTIONALLY created by central banks, by contracting the money supply.

Most people erroneously believe that the stock market crash of 1929 caused the Great Depression. The opposite is true. A contraction of the money supply caused the stock market crash.

This is all part of a larger boom bust cycle that serves the ultra, ULTRA wealthy. The Rockefellers, Duponts Rothschilds, Morgans...

I also, unfortunately, believe that this a prelude to WWII and the eventual forming of the North American Union.

[caywen]

In the software engineering world, this reminds me of that Software Architect who designed an absolutely crappy system that brought an entire team of brilliant people, all of whom had serious doubts about the design, too its knees. Three years later, after the project dies a miserable death, after most of those engineers get laid off, that architect gets to look smart by showing Powerpoints of what went wrong.

[PacificGatePost]

Mr. Greenspan,

As we await evidence of the solvency of other financial institutions, and a return to normalcy, do you not feel it wise to implement some changes to structures that are root sources for the current "recession?"

Let's start near the top... the BOARDROOM. Very serious changes must be made right across the all boards....>

"WE THE SHAREHOLDERS OF YOUR COMPANIES...... 


http://pacificgatepost.blogspot.com/2008/03/letter-to-ceos-of-fortune-1000-cos.html


Due diligence and oversight long ago slid out the window. No one was watching.

James Raider,

[hayduke]

Hey buddy, I don't suppose you had anything to do with the current situation??? WAIT A MINUTE. I think we’ve seen this movie before. This is setting up to be the Jimmy Carter scenario. You know the one where, the illegal, Federal Reserve jacks interest rates through the roof on the new Democratic President thus blaming him (or her) for the economic crisis. The Federal Reserve destroyed the Presidency of the greatest man to hold the office in 60 frickin’ years. They will do it again! Abolish the Federal Reserve!!!!!!!!!

[LordMoon]

After reading, or rather trying to read your point of view in FT, I was struck by a few things.

First of all if anyone should now why this is happening then it should be you.

At this point I do have some questions about what you said though.

First how is stabilizing the mortgage problems going to help with the falling value of the dollar, the rise in Gas prices, the balance of payments, our government being trillions of dollars in debt to fund the Iraq war, credit card resets, and bankrupcy reform? All major problems for the average American.

Actually I think there might be a better solution to all of this than just letting millions of people be ruined financailly.

First we could save a lot of money but just bringing the troops home. Just think of all the money would could save on Defense.

Second we could have a freeze on gas prices, the oil companies are enjoying record profits. Didn't Nixon, put in a freeze under conditions far less drastic than the ones we face.

We could also put a cap on credit card interest rates, no more 35% but instead maybe 7%.

We should also revisit bankrupcy reform and of course there's health insurance. But none of this will ever be done because, those that run this country could care less about what happens to the average American. But you'll spend billions to bail out your buddies on Wal-street.

[hopein]

it is time for a big change--Obama now!

[texanna]

Alan, no duh!!! I don't have any great degree in anything remotely financial from any Ivy League school and even I knew this! If this is the best you can do after your policies and pronouncements helped to put us here, then go away because you're part of the problem not part of the solution.

[sixDegrees]

Interesting how some of my friends who know every last nuance of Hillary-Obama know zip about the financial mudlslide rising around their ankles. Ignorance is bliss, I suppose.

[OrleansCatalan]

Please. Republicans are still praying for Terri Schiavo.

[xrepublican]

ALan - bearing any responsibility ther youself?

Nah.... we didn't need regulation and oversight on all those mortgages.... Low interest rates are GOOD.... M3 is TOP SECRET for a reason.... we're printing money away...

Weimar Republic here we come.... a bankrupt nation that believes it has a right to do as it sees fit, a nation that refuses to admit that it took on a bad war - a war it cannot and will not win (though - in our defense - we have not yet 'surrendered')......

Americans forget their history - if they ever even learned it ......after THAT economic and political melt-down - Germany was 'saved' - by Hitler. Wonder if we'll be following the same insane course, looking for some 'strong leader' to save us and restore our nation's glory? I doubt Russia and China will stand by idly.......

[usaempire]

its the gold standard or eternal war.

[ihixulu]

See Alan, the thing is, we kept you around for so long because you were supposed to, like,be the expert at looking ahead and making sure stuff like this didn't happen. I'm no Ivy League economist with Objectivist leanings or anything but, dang, even I could have told you what you are writing for the FT... 3 years ago!

Alan, please, leave us alone. You will go down in history as having been the enabler of one of the greatest hoodwinks in history. Congratulations, you will be remembered. Now the rest of us have to clean up the mess you made in anonymity.

[nunzia]

And just as bad, your wife Andrea is rewarded with her own show daily.
A little reward to your family for all you've done to America.

[LiarLiarIraqsOnFire]

I knew the housing market was heading for the toilet over a year ago, not because I'm an Ivy League-educated Wall Street trained economist, it's because I have a subscription to Mother Jones and they wrote about the collapse of the Ohio housing market. And as we have been recently told: As Ohio goes, so goes the country. If the doped-up hippies, tree-huggers and liberals over at Mother Jones saw this coming, how could the Insiders of the Old Boys Network over on Wall Street have missed this? The phrase WILLFUL NEGLIGENCE comes to mind.

[MysticInd]

Let us not forget Hillary sold all her stock in May before the beginning crash. The in's get it in diamonds or gold or anything but dollars.

[vippy]

And thank you Alan for putting us there!

[americandiaspora]

well he should know he is one of the causes

[hopein]

It is time for a big change. No more bush or clinton. We need Barack Obama NOW!